Thinking of Selling? New Construction Will Soon Be New Competition

For the last several years, home sellers had to compete with huge inventories of distressed properties (foreclosures and short sales). The great news is that the supply of these properties is falling like a rock in the vast majority of housing markets. Many homeowners are now thinking of selling as the impact of this substantially discounted competition has disappeared.

However, every seller of an existing residential property must realize that there is a new form of competition about to hit the market: newly constructed homes.

As the economy improves, builders will again be bringing their housing developments to the market. Trulia recently reported that the purchaser, given a choice, actually prefers new construction.
Bottom Line
If you are thinking of selling, perhaps you should do it now to avoid the additional competition that will come to the market later this year.

By: KCM CREW

5 Reasons to Hire a Real Estate Professional

Whether you are buying or selling a home, you need an experienced Real Estate Professional to lead you toward your ultimate goal. In this world of instant gratification and Internet searches, many sellers think that they can For Sale by Owner or FSBO.

The 5 Reasons You NEED a Real Estate Professional in your corner haven’t changed, but rather have been strengthened in recent months due to rising interest rates & home prices as the market recovers.

1. What do you do with all this paperwork?

Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true Real Estate Professional is an expert in their market, like these Daytona Beach Shores FL Condos, and can guide you through the stacks of paperwork necessary to make your dream a reality.

2. Ok, so you found your dream house, now what?

According to the Orlando Regional REALTOR Association, there are over 230 possible actions that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, who knows what these actions are to make sure that you acquire your dream?

3. Are you a good negotiator?

So maybe you’re not convinced that you need an agent to sell your home. However, after looking at the list of parties that you need to be prepared to negotiate with, you’ll realize the value in selecting a Real Estate Professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people that you will have to be knowledgeable with and answer to, during the process.

4. What is the home you’re buying/selling really worth?

Not only is it important for your home to be priced correctly from the start, to attract the right buyers and shorten the time that it’s on the market, but you also need someone who is not emotionally connected to your home, to give you the truth as to your home’s value.

According to the National Association of REALTORS, “the typical FSBO home sold for $184,000 compared to $230,000 among agent-assisted home sales.”

Get the most out of your transaction by hiring a professional.

5. Do you know what’s really going on in the market?

There is so much information out there on the news and the Internet about home sales, prices, mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to, to tell you how to competitively price your home correctly at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a low-ball offer?

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.” – Dave Ramsey

Hiring an agent who has their finger on the pulse of the market will make your buying/selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.

Bottom Line:

You wouldn’t hike up Kilimanjaro without a Sherpa, or replace the engine in your car without a trusted mechanic, why would you make one of your most important financial decisions of your life without hiring a Real Estate Professional?

By: KCM Crew

5 Financial Reasons to Buy a Home

Eric Belsky is Managing Director of the Joint Center of Housing Studies at Harvard University. He also currently serves on the editorial board of the Journal of Housing Research and Housing Policy Debate. Last year he released a paper on homeownership – The Dream Lives On: the Future of Homeownership in America. In his paper, Belsky reveals five financial reasons people should consider buying a home.

Here are the five reasons, each followed by an excerpt from the study:

1.) Housing is typically the one leveraged investment available.
“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

2.) You’re paying for housing whether you own or rent.
“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”

3.) Owning is usually a form of “forced savings”.
“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

4.) There are substantial tax benefits to owning.
“Homeowners are able to deduct mortgage interest and property taxes from income…On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

5.) Owning is a hedge against inflation.
“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”

Bottom Line
We realize that homeownership makes sense for many Americans for many social and family reasons. It also makes sense financially.

By: KCM Crew

5 Reasons You Shouldn’t For Sale by Owner

Some homeowners consider trying to sell their home on their own, known in the industry as a For Sale by Owner (FSBO). We think there are several reasons this might not be a good idea for the vast majority of sellers.

Here are five of our reasons:

1. There Are Too Many People to Negotiate With

Here is a list of some of the people with whom you must be prepared to negotiate if you decide to FSBO.

  • § The buyer who wants the best deal possible
  • § The buyer’s agent who solely represents the best interest of the buyer
  • § The buyer’s attorney (in some parts of the country)
  • § The home inspection companies which work for the buyer and will almost always find some problems with the house
  • § The appraiser if there is a question of value
  • § Your bank in the case of a short sale

2. Exposure to Perspective Purchasers

Recent studies have shown that 92% of buyers search online for a home. That is in comparison to only 28% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home. Do you?

3.  Results Come from the Internet

Where do buyers find the home they actually purchased?

  • § 43% on the internet
  • § 9% from a yard sign
  • § 1% from newspapers

The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial.

4. FSBOing has Become More and More Difficult

The paperwork involved in selling and buying a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBOing has dropped from 19% to 9% over the last 20+ years.

5. You Net More Money when Using an Agent

Many homeowners believe that they will save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real commission. The seller and buyer can’t both save the commission.

Studies have shown that the typical house sold by the homeowner sells for $184,000 while the typical house sold by an agent sells for $230,000.   This doesn’t mean that an agent can get $46,000 more for your home as studies have shown that people are more likely to FSBO in markets with lower price points. However, it does show that selling on your own might not make sense.

Bottom Line

Before you decide to take on the challenges of selling your house on your own, sit with a real estate professional in your marketplace and see what they have to offer.

By: KCM Crew

Short Sales More Attainable Than Homeowners Think

When a homeowner is unable to make their mortgage payments or owes more on the home than it’s worth, a short sale can be a viable option that avoids the negative implications of a foreclosure for both the homeowner and the mortgage-holder.

However, common perceptions of short sales as difficult, lengthy, restricted to specific circumstances, and harmful to personal credit cause many to shy away from the option.

In a blog post Monday, Freddie Mac SVP Tracy Mooney aimed to set the record straight regarding Freddie Mac short sales.

While short sales have been known to drag on in the past, Freddie Mac’s Standard Short Sale requires servicers to approve or deny a homeowner’s application within 30 days. After approval, the short sale should close within 60 days, according to Mooney.

Misperceptions regarding eligibility requirements are also a barrier, Mooney says. She clarified that short sales can be an option for owners of investment properties or second homes, those with second mortgages, and homeowners who are current on their loans.

Those who are current on their loans must meet general eligibility requirements, “the property must also be your

primary residence and your debt-to-income ratio must be greater than 55 percent,” Mooney said.

For those who have second mortgages, Mooney said Freddie Mac is “offering up to $6,000 to subordinate lien holders—who are like second mortgage companies—in exchange for releasing the subordinate lien, extinguishing the underlying indebtedness, and waiving the right to pursue deficiency.”

Another major source of concern for homeowners is the impact a short sale will have on their credit scores and their ability to obtain another mortgage in the future.

“While only the credit reporting agencies that calculate your credit score will know for sure, it’s possible that a short sale might be better for your score than a foreclosure,” Mooney said.

“Even if it isn’t, a short sale gives you time to find a more affordable place to live and exit gracefully from your obligation,” she added.

Mooney also assured homeowners that in most cases, they will not be on the hook for the full mortgage loan amount, though they may be required to pay a portion of the unpaid balance after the short sale closes.

When a borrower enters into a short sale, the impact on his or her ability to obtain a new mortgage depends on the circumstances, according to Mooney.

Those who enter into a short sale after a financial hardship such as a medical emergency or loss of income must wait 24 months to re-establish credit and apply for a new mortgage loan, while those who opt for a short sale due to “personal financial mismanagement” must wait at least 48 months before applying for another mortgage, according to Mooney.

Mooney recommends homeowners consider a short sale if they do not qualify for other loss mitigation options, need to move to obtain or maintain their jobs, or are underwater.

By: Krista Franks Brock

The #1 Reason You Should Sell Now

The price of any item (including residential real estate) is determined by ‘supply and demand’. If many people are looking to buy an item and the supply of that item is limited, the price of that item increases.

According to the National Association of Realtors (NAR), the supply of homes for sale dramatically increases every spring. Putting your home on the market now instead of waiting for the increased competition of the spring might make a lot of sense.

Buyers in the market during the winter months are truly motivated purchasers. They want to buy now. With limited inventory available in most markets currently, a seller will be in a great position to negotiate.

By: KCM Crew

A Deficiency Balance Can Bite You in the Butt

First off, my apologies for the racy title, but it quite true. A deficiency balance, depending upon where you live, can come back to bite you in the butt; it could haunt you years later. So… you had better watch out!
What Is a Deficiency Balance?

In short sales, the short sale lender often approves the short sale. What this means is that they approve the sale of the home at a specific amount, which is less than the amount owed on the mortgage. The difference between the amount owed on the mortgage and the amount approved the in the short sale is called ‘the deficiency.’

One of the chief concerns of short sale sellers and distressed borrowers considering listing their homes as a short sale is whether the lender will come back after the property has been sold and “go after” or sue the short sale seller for the remaining balance or the deficiency.
Will a Short Sale Lender Pursue Deficiency?

At Short Sale Expeditor® we do not have a crystal ball (although we do have a Magic 8 Ball®). Also, we are not attorneys, so it is a good idea for distressed borrowers to always confirm everything with a good real estate attorney. Unfortunately, we cannot predict what may happen in the future with respect to the short sale lender and the deficiency balance.

However, there are three very important things that can assure that the lender will not pursue deficiency after the closing. So, please read this!

Anti-Deficiency Statutes. In California, we have an anti-deficiency statute that protects most short sale sellers from any liability for the deficiency balance after the closing of a short sale. The Bill became a law on July 15, 2011, so any short sale sellers with closings on or after that date may be protected from deficiency by this statute. Click here to read more.
The HAFA Program. The Home Affordable Foreclosure Alternatives Program (HAFA) is the U.S. Treasury program for distressed borrowers that want to participate in a short sale or deed-in-lieu of foreclosure. One of the best benefits (aside from the $3000 in relocation assistance) is that the lenders right to pursue deficiency is waived for all short sales approved through this program.
Language in the Short Sale Approval Letter. Prior to July 15, 2011, lots of short sale lenders in California would provide short sale approval letters that stated their permission to conduct the short sale. In those letters, there may have been a sentence that stated something to the effect of “We reserve the right to pursue deficiency.”This is dangerous language, and the Short Sale Expeditor® staff spent many hundreds of hours prior to July 15, 2011 renegotiating approval letters so that the language would read, “We waive the right to pursue deficiency.” Agents in states without anti-deficiency statutes would be well advised to negotiate those terms into the approval letter.

Deficiency Lawsuits

I recently was a lurker on a Facebook conversation in which one individual was saying that a past client of his received information that the bank was now trying to pursue the deficiency. This situation related to a state without an anti-deficiency statute, and the agent stated that this was the first time he had seen a bank attempt to “go after” a short sale seller.

Since you never know what may happen in the future, it’s always best to cross all your ‘t’s and dot all your ‘i’s. Agents from states that do not have anti-deficiency statutes need to carefully read the short sale approval letter when it arrives, share it with the sellers, and have the sellers hire an attorney to review it. Don’t get so excited about a potential closing that you lose site of the fact that the seller could be sued! Make sure that the language adequately protects all parties or the deficiency may come back to bite you (not just the seller) in the butt!

by Melissa Zavala

Bill Seeks to Extend Federal Tax Exemption for Forgiven Mortgage Debt

Congressman Bill Foster (D-Illinois) introduced the Homeowners Debt Relief Extension Act (H.R. 3856) on Tuesday. The bill would extend the mortgage debt tax exemption that’s been in place since 2007 for another two years.

The Mortgage Debt Relief Act of 2007 makes debt that is reduced or cancelled through a loan modification or debt forgiven through a foreclosure or short sale tax-exempt. Other criteria also apply, such as the indebtedness must be on a principal residence and the maximum amount that can be claimed for the tax break is $2 million.

Since 2007, Congress has extended this tax relief to homeowners so that they are not liable for taxes on the difference between the house’s value and the loan modification or between the house’s value and the amount of a foreclosure sale or short sale. This tax relief expired on December 31, 2013, however, and so far, no extension has been passed by lawmakers, though homeowner advocates are lobbying heavily to reinstate the mortgage debt tax exemption.

Foster’s bill would ensure any qualifying reduction or cancellation of mortgage debt is not considered taxable income by extending this tax relief through January 1, 2016, for debt forgiven after December 31, 2013.

Foster’s proposal calls for the costs of such an extension to be offset by repealing a tax break in the Internal Revenue Code’s Section 199 for oil and gas companies. Foster says the Section 199 deductions are no longer necessary since oil and gas companies are making billions in profits each year.

“With millions of struggling homeowners still underwater on their mortgages, now is not the time to cut off this tax credit,” Rep. Foster said. “We shouldn’t be offering up millions in tax breaks to oil and gas companies, while leaving working families, still struggling to recover from the recession, with a bigger tax bill.”

By: Carrie Bay

Are the holidays a good time to sell?

Although the holiday season isn’t really considered the best time to sell, the real estate market is much tighter, resulting in less competition for sellers. At the same time, motivated buyers are still in the market for homes, in hopes that they can make a purchase.

During the holidays, you can liven up your home with some lights and ornaments to attract buyers. Although you can make your home “shine” during the holidays, try not to overdo it. Homes often look their best during the holidays, but sellers should be careful not to overdo it on the decor. Too many ornaments could have a negative effect, and actually turn buyers away. Obviously, you don’t want to offend people, so be sure to go with tasteful decorations, as opposed to large and gaudy ones.

Also keep in mind that emotions play a big role in a homebuyer purchases. A well organized home with a few tasteful decorations shows much better than a cluttered home with your kid’s toys lying around the living room. People will often purchase a home solely based on their gut feelings. If a buyer “falls in love” with your home, chances are they’re going to be more inclined to purchase it.

On a final note, it’s also a good idea to make it easy for people to stop by to see your home. In this case, flexibility is a key factor. People are busy during the holidays, and the chances of selling your home will be much greater if make it available for them to see.

Despite the fact that many people feel that the holidays aren’t a good time to buy or sell a home, this really isn’t the case. With a little knowledge and effort, you can sell your home in a timely manner, relax, and enjoy the Holidays!

Article from the KCM Blog

Is Homeownership a Good FINANCIAL Decision?

Many have reported on Robert Shiller’s recent comments on the investment aspect of homeownership. Shiller, a Yale professor and co-founder of the Case-Shiller Home Price Index, is famous for making provocative comments on house prices and the financial benefits of owning a home. In a recent Bloomberg Television interview, Shiller responded to a question about homeownership as an investment this way:

“So, why was it considered an investment? That was a fad. That was an idea that took hold in the early 2000?s. And I don’t expect it to come back. Not with the same force. So people might just decide, ‘Yeah, I’ll diversify my portfolio. I’ll live in a rental.’ That is a very sensible thing for many people to do.”

Today, we would like to debate Shiller’s notion by offering three FINANCIAL reasons to purchase a home:

1.) You Can’t Live in Your IRA

When you buy your own home you are not taking available dollars away from another investment. You are replacing one housing expense (rent) which has no potential for a return on investment with another (mortgage payment) that does give you an opportunity for a return. We realize that there has been research showing that over the last 30 years renting has been less expensive than owning. That research also says that if you invested the entire difference between the rent payment and mortgage payment you may have done better financially. There are two challenges with this conclusion:

  • § Today, in the vast majority of the country, renting is actually more expensive than owning a home.
  • § History has proven that tenants DO NOT invest the difference in their rent and mortgage payments.

2.) Homeownership Creates Wealth

Paying a mortgage creates what financial experts call ‘forced savings’. The Joint Center for Housing Studies at Harvard University released a study titled America’s Rental Housing: Meeting Challenges, Building on Opportunities. In the study, they actually quantified the difference in family wealth between renters and homeowners:

“[R]enters have only a fraction of the net wealth of owners. Near the peak of the housing bubble in 2007, the median net wealth of homeowners was $234,600—about 46 times the $5,100 median for renters. Even if homeowner wealth fell back to 1995 levels, it would still be 27.5 times the median for renters.”

3.) There Are Tremendous Tax Advantages to Investing in a Home

There is no doubt that selling an investment such as gold is easier than selling your home. However, this liquidity comes at a price. The price is called capital gains. That is the tax you pay on any financial gain you receive from the investment. This tax doesn’t apply the same way when you sell your primary residence:

Theresa Palagonia, a CPA and the Accounting Manager for the firm G.S. Garritano & Associates, was good enough to explain the Home Sale Exclusion Rules:

“You may qualify to exclude from your income all or part of any gain from the sale of your main home.

Maximum Exclusion

You can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true:

  • § You meet the ownership test.
  • § You meet the use test.
  • § During the 2 year period ending on the date of the sale, you did not exclude gain from the sale of another home.

If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions listed above.

You may be able to exclude up to $500,000 of the gain on the sale of your main home if you are married and file a joint return and meet the requirements. (Special rules apply for joint returns.)

We will let you decide for yourself whether homeownership makes sense financially.

Article from the KCM Blog

Michael D. Babbitt – Cascade Sotheby’s International Realty – Licensed Broker in Oregon and Washington